Wednesday, January 2, 2013

Dealer says to user: hey, you wanna lay off my product?

BEIJING (Reuters) - The last-minute U.S. deal over tax increases has fixed one problem, but the world's largest economy must get to grips with a budget deficit that threatens not a "fiscal cliff" but a "fiscal abyss", China's Xinhua news agency said on Wednesday. The state news agency said in a commentary, issued in English on its website, that while the United States was clearly the dominant economic power, it "simply cannot live on borrowed prosperity forever", and its politicians seemed reluctant to tackle its total debt of about $16 trillion.

"In a democracy like the United States, tax increases and spending cuts, the exact dose of medicine needed to cure its chronic debt disease, have long proved hugely unpopular among voters," Xinhua said. "So the politicians have chosen to kick the can down the road again and again. But as we all know, the can will never disappear. Sometime and somewhere, you might trip over it and fall hard on the ground, or in the U.S. case, into an abyss you can never come out of."

China has a strong interest in a healthy U.S. economy. It sits on the world's biggest pile of foreign exchange reserves, worth $3.3 trillion, and as much as 70 percent of the holdings are invested in U.S. dollar assets, including U.S. Treasuries, according to analysts. The United States is also a major export market for China.